Books

Synopsis

The classic bestseller by the man who enjoys the confidence of franchise leaders of the world! Franchising provides an ambitious business aspirant with the benefit of the skills, knowledge and best practices in management, from people who have run a successful business over many years.

At the same time franchising offers successful business enterprises with a fast-track route to growth, that bypasses the obstacles of finance and human resources.

Franchising has now emerged in India as a growth industry with great potential. It is franchising that will provide the last mile connect in the world's largest consumption market.

There still is little available literature on the subject. Across Asia, consulting and management knowledge in franchising is the preserve of only those practicing in this field. Franchising: The Science of Reproducing Success has proved to be the best primer on this subject. The fifth edition has been updated with fresh case studies and made more reader-friendly. The text rings with the authenticity of the leading expert in the field of franchising in India.

Contents

Chapter 1:  The Foundation of Franchising
Chapter 2:  What a Franchisee Needs to Know
Chapter 3:  What a Franchisor Needs to Know?
Chapter 4:  Franchisor-Franchisee Relationship

Detailed Contents

Acknowledgments xi

Preface xiii

Chapter 1: The Foundation of Franchising

  • What is Franchising?
  • Why Franchise?
  • Categorizing Franchising
  • The Franchise Scenario
  • Case Study 1: Investing in the Future: Pre-school Franchise
  • Case Study 2: Walk-in Clinics: Franchising: Options in Healthcare in India

Chapter 2: What a Franchisee Needs to Know

  • The Deliberation Stage
  • Are You Ready for a Franchise?
  • Choosing the Right Franchise
  • Step 1: Examine your opportunities
  • Step 2: Examine franchisor and franchise
  • Step 3: Evaluate options
  • The Planning Stage
  • Plan Franchise Finances
  • Evaluate Demand for the Franchise Products
  • Find The Ideal Location
  • Select a Business Entity
  • Financing a Franchise
  • The Franchise Business Plan
  • The Management Stage
  • Find Good Employees
  • Design Promotional Strategies
  • Manage Franchise-Franchisor Relations
  • An Exit Strategy
  • Franchising in India Today

Chapter 3: What a Franchisor Needs to Know?

  • Do You have a Growth Vision?
  • Why Franchise?
  • The Deliberation Stage
  • Qualities of a Successful Franchisor
  • Evaluate Your Enterprise
  • Evaluate the Market
  • Franchisor Feasibility Study
  • The Planning Stage
  • Business Planning
  • Strategic Planning
  • Documentation Stage
  • The Management Stage
  • Nature of Managerial Work
  • Developing the Franchise Systems
  • Setting up a Franchise Network in India

Chapter 4: Franchisor-Franchisee Relationship

  • A Partner or a Parent?
  • The Legalities of the Relationship
  • Important International Laws
  • Important Indian Laws
  • Franchise Documentation
  • Negotiating a Franchise Agreement
  • Future Trends in Franchising

  • Appendix A: Franchise Categories
  • Appendix B: Outline of Franchise Business Plan
  • Appendix C: A Sample Income Statement Format
  • Appendix D: Draft Franchise Agreement

Excerpt

What Is Franchising?

Franchising in Brief The dictionary defines the word 'franchising' as 'an authorization granted by a company to someone to sell or distribute its goods or services in a certain area'.

In legal terms, franchising is 'rights of privilege granted'. It is the granting of certain rights by one party (the franchisor) to another (the franchisee) for a sum of money. The franchisee obtains the authority to exercise these rights under the guidance of the franchisor.

The International Franchise Association, the major trade association in franchising, defines a franchise as a 'continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management in return for a consideration from the franchise'.

Franchising is a Symbiotic Relationship

"I give, you take, and you give, I take"

As mentioned above, at least two participants are involved in a franchise relationship. The franchise relationship is symbiotic, as both the franchisor, who lends his trade name and business system, and the franchisee, which pays for the right to do business under the franchisor's name and system, stand to mutually benefit. In a way, the franchisor is a true blood entrepreneur who has set up a firm from scratch and is now looking for expansion. The franchisee is an entrepreneur whose job is to take care of the franchisor's legacy like a guardian. Both benefit from this relationship. The franchisor finds the franchisee necessary for his business growth, and the franchisee sees the franchisor as a model for his own personal growth to a true blood entrepreneur. See Figure 1.1

Technically, the contract binding the two parties is the franchise, but the term is often used to mean the actual business that the franchisee operates.

Whose business is it anyway?

To Reproduce Success

Rather than just sell a business, what franchise companies really do is sell an idea. They sell the formula that they have developed and have been successful with. This formula can come in various combinations, but generally it comprises a trademark, a uniform operating system, training and consultation, and promotion.

The franchisee has simply to follow that formula for success for its own success. And all that it has to give in return is an initial franchise fee, and ongoing royalty payments.

So apart from acquiring the formula of a proven and efficient method of conducting business which is provided by the franchisors, the franchisee also benefits from the management assistance and training, as well as marketing assistance which are provided by the franchisors. Franchisors normally conduct national or regional marketing campaigns developed by professional advertising agencies and help franchisees run local ad campaigns. The acquired cumulative experience of the franchisor is available to the franchisee at a nominal cost and through which the franchisee can give his own business that much more impetus for success.

Sometimes franchisees are helped by their franchisors not just in preparing business plans and strategies but also in obtaining financing for their outlets. Financial institutions too may be more willing to lend the necessary fund to the prospective franchisee if a well known franchisor is backing the applicant. It would be easier to obtain the funds when approached as a franchisee with a well established franchisor, than as an entrepreneur with a new business concept.

But what's in it for the franchisor?

Surprisingly, a lot! Franchisors stand to benefit from the explosive growth potential as seen with KFC and McDonald's in the international space and VLCC and Crossword book stores in India, without spending a penny of their own.

Expansion of any business is risky and it requires significant investments of both capital and human resource to run the locations. But when franchised, the franchisee provides both the capital as well as the labour or human resource required for expansion.

Thus, the franchisor would be limiting the risk factor involved in the growth of his business. He would be allowing expansion to occur without himself having to give in the vast amounts of operating capital. The principle of Other People's Money (OPM) is what franchisors use to fund their own growth.

Often a lack of funds or workers can cause a company to grow slowly. But by opting for the franchising route, the franchisors benefit by allowing for their companies to expand much more quickly than they would have done on their own.

The franchisor can also be assured of having highly competent and motivated owners or managers at each outlet. Since each franchisee or manager will be responsible for the success of the franchise, no efforts would be spared by them to ensure a successful business.

Another advantage the franchisor has in franchising is that he might not necessarily have to sell shares of his company to raise the required capital for expansion.

While it is the franchisee that provides all the expansion capital, assumes all operating and management responsibilities, and shoulders virtually all risk, the franchisor simply earns more and more, for doing less and less. In other words, the franchisor earns more and more for what he has already done by allowing others to do the same. That is the beauty of franchising.

The franchisor not only gains on the economic benefits of opening identical successful units across the country or the world, but also receives profitable revenue from initial franchise fees and ongoing royalty payments.

Further, a franchise company only needs a limited number of personnel to sell franchises and then provide training and ongoing assistance. As franchisees learn how to operate the business, they require less attention and yet continue paying an ever-increasing sum to the parent company as royalty.

However, the franchisor cannot simply rest on his laurels. As the franchisee brings in more money, it is up to the franchisor to innovate with more products and services, and actively promote them.

Franchising Cover

Synopsis

Less than 200 pages of lucid text will empower you with the attitude needed to build a growth fantasy!

Entrepreneurship is a mental attitude - a mindset. It is the sense of responsibility that comes from the ownership of an enterprise. We are talking about intellectual and emotional ownership, not mere legal ownership.

An entrepreneur mindset is about owning our dreams, our flights of fancy. We need to picture our castles-in-the-air completely, smell our khayali pulao, and then discover the means of making it come true. A big fantasy with a feasible action plan is vision.

The vision gives us the courage to own the risk and the generosity to share the rewards of our enterprise. When this vision engages the individual members of our team, a conviction runs through our enterprise. It is conviction and integrity that builds the dream team.

  • takecharge! is about owning a dream and making it a reality
  • takecharge! is about how to build a team that works for the vision of one that's shared by all.
  • takecharge! is about 10 Entrepreneur Mindset Strategies that will build excellence in enterprise
  • takecharge! is about the attitude that powered Vijay Kumar to tell Mr R K Gupta, "Meh paanch lakh ka sauda karne aaya hoon, aur meri jaib meh paanch phuti kaudiya bhi nahin hai (I have come to do a deal for five hundred thousand rupees, when I don't even have five busted bits in my pocket)" (Trishul, 1978)
  • takecharge! challenges the reader to demand more from the self and always look higher!

Contents

Acknowledgements

Preface

1. Introduction: Entrepreneurs and their Enterprise

2. Fear-Fun-Fantasy: The Entrepreneur Equilibrium

3. Build a Growth Fantasy

4. Lay the Foundation of the Fantasy

5. Live the Fantasy: 10 Strategies for Entrepreneur Excellence
  • Entrepreneur mindset Strategy 1: Jack be Nimble, Jack be Quick!
  • Entrepreneur mindset Strategy 2: Let's Walk Before We Run
  • Entrepreneur mindset Strategy 3: When We Stumble... Let's Learn
  • Entrepreneur mindset Strategy 4: The Business Can Look After Itself - Let's Build the Brand
  • Entrepreneur mindset Strategy 5: To Sell We Need to "Connect" and "Re-connect"
  • Entrepreneur mindset Strategy 6: A Team to Build the Fantasy With 142
  • Entrepreneur mindset Strategy 7: Ultimately it is "Us Only", Let's Build Personal Capacity
  • Entrepreneur mindset Strategy 8: Share the Reward, Own the Risk
  • Entrepreneur mindset Strategy 9: On the job 24/7, Let's to Find the Time
  • Entrepreneur mindset Strategy 10: If We Aren't Having Fun - Let's Change the Game
  • Entrepreneur Mindset Toolbox

6. Always Higher

Bibliography

Index

Excerpt

ENTREPRENEUR MINDSET STRATEGY NO. 1
JACK BE NIMBLE, JACK BE QUICK!
Build the mindset of nimble thinking and quick action

From day one, an entrepreneur is sailing against the wind. All alone. There are sharks in the water, and it is a new boat that has not been tested for leaks! Two hundred things to do every day, but there are only 24 hours in a day and we have only two hands, two eyes, two ears, one mouth and one overburdened brain. No wonder that world- wide, 85% of small and medium enterprises close shop in the first five years of their existence.

So what do we do? In the beginning, we need to build the mind- set of nimble thinking and quick action. Our minds have to be nimble enough to stay connected to everything that is important to our enterprise and quick enough to not get bogged down with any one thing that we are doing. The moment our focus is engaged with one urgent and important thing, we lose the connection with all the other important things.

There are seven rules across four functional areas that will help build the faculty for nimble thinking and the ability to take quick action in us. The four functional areas are:

  • Revenue
  • Competition

  • Resources
  • Entrepreneur focus.

The seven rules are:

revenue 1 Read the DSR – the daily sales pulse
resource 2 Build teams around key personnel
  3 Empower the team to support the roof
  4 Fill the war chest before riding to battle
  5 Submit to financial discipline
Competition 6 Downplay your strengths; play up your weakness
Entrepreneur focus 7 Build your inner circle


Let us deal with each of these areas individually to understand the rule or rules related to each area.

REVENUE

RULE 1: Read the DSR - the daily sales pulse

Revenue is the breath of an organization. If there is no revenue there is nothing. Throughout the life of an enterprise, successful entrepreneurs keep track of inflows on a daily basis. What is their tool? The daily sales report.

We need to understand that our sales personnel are like our front- line soldiers, expanding our interests in what is essentially hostile environment. They are, so to say, swimming with the sharks. It is crucial that their everyday successes and failures, are known by the entrepreneur. The DSR is like Sanjaya informing the blind Dhritrashtra about developments in the battle at Kurukshetra. We are not everywhere in the field, we are not everywhere in the frontline. We need to admit that we are blind, especially if we do not have our finger on the DSR pulse.

Each sales person needs to file a daily sales report (DSR), which strives to capture in as concise manner as possible the salesperson's activities during the day - the response generated from customers, the orders they have booked from the channel, the collections they have deposited with the accounts department.

Powered by the last mile sales rep who is filing this everyday, the DSR helps us track the daily revenue, the daily sales that will become accounts receivables to feed medium term revenue and daily trends in demand, which will help us forecast long term sales and long term revenue. In a growing organization, the secular trend is that collection will always lag behind sales, which will always lag behind demand. However, the trends should all be growing at an equal pace - three parallel lines rising acutely. Alerts should sound the moment any one of the lines falters.

The DSR pulse should be tracked product by product, head count by head count, division by division and cluster by cluster. This will help us stay on top of crucial developments in our business across brand, human resource, department and territory. The DSR pulse needs to be supplemented by the entrepreneur by an actual ear to the ground. This can be accomplished by maintaining a personal inter- action with key accounts. Check any medical diagnostic test, the report always has a caveat - to be correlated with clinical examination. As an entrepreneur, our personal contact with key accounts is like the clinical examination that a doctor does.

DSR AND THE "THREE-C FRAMEWORK"

To be able to read and understand the DSR pulse and especially to work out the dynamics of revenue flows, we need to have some understanding of the ecosystem within which our enterprise works. A good tool for this is what I call the Three-C Framework. This is a tool that enables us to examine and understand the different drivers and the time scales that affect the three basic actors in the ecosystem in which our enterprise operates. These are the customer, the channel and the company. Our business venture is totally dependent on people who have different drivers and objectives than we have. It is only when we recognize that, can we correctly interpret the signals we receive from the market. Our revenue inflow is dependent on our customers and the channel that serves them. Our business objective, as an entrepreneur, is long term and what drives us is an increase in the market share. Our channel partners' objective is medium term and their driver is RoI (return on investment). Our customer's objective is immediate and their driver is value. It is only when we can generate demand from the customer that we can generate sale from the channel. It is from channel sale that we generate revenue. (See Figure 5.1.1)

chart

To understand this better, let us pick a line of business that is extremely seasonal - umbrellas, raincoats and rain-shoes. Customer demand for it is during the rainy season and if their demand is not met at the first shop they enter, they will go to the next. The customer will not wait. Even for consumer durables, the customer may take his or her own time to reach a decision about the brand and model of choice, but once that is fixed, it is not likely they will wait for the satisfaction of their demand. Our primary interest is in building and determining demand early enough so we can plan production accordingly.

The channel partners' objective is based on the medium term. They stock their outlets to fulfil demand that they anticipate in the period between each delivery cycle. Channel partners do not have any loyalty to the product or brand; their driver is just the return on their investment. They are interested in the absolute margin that they make from what they purchase from us and what they sell on down- stream. Yes, absolute margin, because low volumes may not cover overhead costs. For our rainy weather products, they will only stock in the season. As the delivery cycle becomes meaningless due to the extreme seasonality of demand, credit and sale on consignment basis becomes a difficult proposition here. We do not want to be stuck with the product during the off-season. The primary interest of the channel is on discount; our primary interest will be clearing stock and securing payment.

takecharge Cover
takecharge Cover

Synopsis

"THE CUSTOMER IS NOT YOUR SPOUSE; SHE IS YOUR BOSS!"

A masterclass on building vibrant relationships in the market by dancing with the customer!

We have for too long measured customer impact in terms of demographics and market share. We now need to focus deeper into the impact we make in the lives of individual customers. This calls for a more intimate knowledge of our customer.

There is no marketing or research agency that can deliver this knowledge to us, as experts focus too much on the numbers game, abstract averages and generic types. We need to directly enter into a conversation with our customers, to learn from them more about themselves, so we can make that value offering they want and need. Or better still invite them to design what they want! We need to do the tango with our customer!

  • It Takes Two to Tango builds a case for how we have emerged into a customer dominated, shape-shifting world. Building customer connect needs to be seen as investing into our customers as the most valuable asset of an enterprise.
  • It Takes Two to Tango shows how the route to building customer equity is only through delighting our customers with outstanding customer experience.
  • It Takes Two to Tango is about how we need to, and can, master the management of innovation.
  • It Takes Two to Tango talks about building the organisation as an organic ecosystem in which key members of the team are empowered to fulfil the entrepreneurial task of leading the tango with customers.
  • It Takes Two to Tango amends the famous Ogilvy quote to make it more relevant today: “The customer is not your spouse; she is your boss!”

Each chapter presents a step-by-step guide to implement the recommended changes in mindset, strategy and business practice so we call fall into rhythm with our customers. Replete with interesting business examples and practical insight, It Takes Two to Tango will prove invaluable to all marketers who want to build business on the most important revenue source in the world – sales income!

Contents

Chapter 1 : SHIFT HAPPENS
Welcome To The Shape-Shifting World Of Customer Domination

Chapter 2: BUILDING CUSTOMER EQUITY
Establishing Connect In A Customer-Dominated World

Chapter 3: THE IMPORTANCE OF WOW!
Creating And Delivering Outstanding Customer Experience

Chapter 4: THE IMPORTANCE OF INNOVATION
Replication Is Passé And Innovation Has To Be Managed

Chapter 5: BUILDING THE TANGO TEAM
Resilient Organic Networks Built On Command Structures

Chapter 6: SHIFT OWNERSHIP
How To Make Customers Dance

Excerpt

CHAPTER 1 - SHIFT HAPPENS
WELCOME TO THE SHAPE-SHIFTING WORLD OF CUSTOMER DOMINATION

The past is a foreign country: they do things differently there.
– Leslie Poles Hartley (1895-1972) a British novelist and short story writer

In the 21st century, somebody or something has changed the rules about how our world works.
– Eddie Obeng, British educator, author and motivational speaker

I work with a leading Indian fashion retail brand as a retail and franchise consultant. Not so long ago, my team and I woke up to find the magic of our stores suddenly fading.

Our early success had emboldened us into pushing for growth, and everything had been steaming along fine. The service, ambience, new product launches … were all being executed and maintained well. But then suddenly the footfall reduced and the cash registers no longer rang as loudly and as frequently as they did before.

The reason was outside our control. The leading European fashion retail brand Zara had opened an outlet in town.

We have all heard this puzzle: How do you shorten a line without touching it? The answer is simple: Draw a longer line next to it. That was what had happened to my client when I was looking out for their best interests.

More than two decades after economic liberalisation, India had changed. The high growth rates had increased the income levels and as the economy grew, the great Indian middle class came into its own. Today, India is on the verge of emerging as one of the largest consumer markets of the world. It is also amongst the few markets showing high growth. Many international brands have entered this market, and now the world is on the lookout for a profitable way to enter.

To what extent are we, as marketers who serve the Indian customer, able to understand what is happening around us? Are we still connected with the customer we want to serve?


Shift Happens

Go to your favourite search engine on the Internet and type out the words “Shift Happens”. Amongst the first five items will be a presentation with the same title. Watch it. The moment I first saw it I liked it. It was this that inspired the foundation of this book. Let me tell you the story behind this presentation.

In 2006, Karl Fisch, a schoolteacher in the United States, was invited by his school administration to address the beginning-of-the-year faculty meeting. He decided to take the help of a friend and prepared a presentation that confronted his colleagues with dramatic, thought-provoking facts. A copy of the slideshow was placed on Karl Fisch’s blog on August 15, 2006, and it went viral.

By June 2007, five million people across the globe had seen an improved version of the original slideshow. Over the years, many versions of the audio-visual have been made. David S. Rose, who is the Chair for Finance and Entrepreneurship at Singularity University, and is also the Chairman of the New York Angels investment association, did version 6.0 in January 2012. By this time, more than 20 million people had viewed one or the other edition of the presentation.

The structure of the AV is very simple. It starts with a simple question: “Did you know?” And then it presents facts based on a theme. This structure is repeated across various themes. In the original slideshow, though, the first part pertained specifically to Karl’s school, it has been removed from the versions available on the Internet.

One of the themes dealt with is changing world demographics. The case is made that in the foreseeable future, a majority of educated English-speaking population in the world will be from India and China.

Looking back on history, we are reminded that the leading country in the world in 1900s was the United Kingdom. The implication is that USA need not always be the leading economy or paramount nation. The inference that viewers draw is that soon Asia, led by China and India, will be the centre of the economic world.

The message is reinforced by facts showing that the US is lagging behind other countries in Internet penetration. This is a significant point as world-over the Internet users are growing to become communities larger than most nations. With 800 million accounts in December 2011, a nation of Facebook community is now the world’s third-largest country.

Technological change is making the twenty-first-century world witness exponential change. The first text message was sent in December 1992; the number of text messages sent and received today exceeds the population of the planet. The years it took to reach a market audience of 50 million in the era of radio was 38 years, for TV – 13 years, for the Internet – 4 years, for the iPod – 3 years, for Facebook – 2 years and for Google+ – just a year!

The conclusion of Karl Fisch’s message is a simple yet profound one. He takes the American slang version of the philosophical French phrase c'est la vie! (Such is life), which is “sh_t happens!” and adds an “f” to it, saying: “Shift Happens”.

Franchising Cover
Meet Gaurav Marya
  • Delhi 3, 4th November
  • Lisbon 5, 6th November
  • London 7, 8, 9, 10th November
  • Delhi 11, 12, 13th November
  • Mumbai 14, 15th November
  • Hyderabad16th November
  • Chennai 17th November
  • Delhi 18, 19, 20th November
  • Pune 21st November
  • Bangalore 22nd November
  • Mumbai 23, 24th November
  • Ahmedabad 25th November
  • Delhi 26, 27, 28th November
  • Kolkata 29th November
  • Siliguri 30th November
  • To meet Gaurav Marya in these cities call Nitin Gandotra +91-7838800759 or email: chairmanoffice@franchiseindia.com to fix an appointment

Franchising can help in creating larger scale without heavy investments in retail space and business structure. The Financial Times-Oct, 2014

Mr. Marya expressed hope that $500 Bn. retail sector will get a positive boost with a stable government after the current Lok Sabha elections. Statesman April 29th, 2014

White Indian restaurant brands have done well nationally, only a few of them have been successful in international markets. The presence of Indian brands/ restaurants outside the country is very fragmented. The Economic Times April 26th, 2014

In categories like electronics, there is a need to develop expertise in handling after sales trouble. With new assortments there might be disappointments and ensuring the quality would be a tall task. Business Standard-April 25th 2014

Growing at 25% annually, India is becoming the world's largest franchising marketplace after USA. New Today Chennai-Oct, 2014